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Time to Focus on 'Return of Capital'

Reflections on the day after the election
Wednesday, November 7, 2012, 1:01 PM

I am more concerned with the return of my money than the return on my money.

- unknown (often attributed to Mark Twain or Will Rogers)

The U.S. Presidential race is now behind us. And this morning the world woke up and realized that all the issues the election postponed now lie before us.

In his victory speech, President Obama focused on moving 'forward':

Obama's re-election puts 'forward' to the test

"You elected us to focus on your jobs, not ours. And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together. Reducing our deficit. Reforming our tax code. Fixing our immigration system. Freeing ourselves from foreign oil. We've got more work to do."

That's not a bad list of several of the bigger challenges we face: perniciously high and persistent unemployment, trillion dollar annual deficits, a complex and unequal tax code, overdependence on fossil fuels (domestic as well as foreign, I would add), and population management. These are truly prodigious issues that our nation is struggling with, in many cases for decades without resolving.

But that list of woes is not near complete. Add to it our national over indebtedness and insolvency, our eroded manufacturing base, escalating costs of food/fuel/health care, our outdated infrastructure, our failing educational system, accelerating global depletion of and competition for key resources, an aging population, the most dramatic wealth gap in our country's history, and an unsustainable monetary system. For certain, there are also many other competing problems that can be further added to this 'worry list'.

The hard truth is that these problems are not going to be resolved in the next four years, irrespective of whoever won the election last night.

In fact, as Chris so often states, many of these are not problems; they are predicaments. Problems have solutions. Predicaments have only outcomes. Outcomes that need to be managed. And if you're jawboning about 'solving' a predicament (which our politicians have made a full-contact sport out of), you're wasting precious time.

So, the big question is: what approach exactly are we going to use to move 'forward' from here? From what we're seeing so far, the best I can tell is we are going to continue to throw money at these problems/predicaments until it's clear to all that won't work anymore.

The Bush and Obama administrations have seen exploding debt and deficit levels accompanied by staggering issuance of new money by the Federal Reserve. There is little to indicate that this policy is going to change as long as our economic malaise continues. In this way, the government is taking future wealth from our children's pockets.

And it seems increasingly clear that the government will take more of the current wealth from ours, too. Rather than take the pain of reigning in spending, government demonstrates, time and again, its preference to raise revenues via taxation.

PIMCO's Bill Gross predicts the same:

Gross: Fixing 'Cliff' Will Mean 'High, Higher' Taxes

A newly re-elected President Barack Obama will push for higher taxes -- including a dividend-tax hike that will cause a substantial drop in stocks, Pimco's Bill Gross told CNBC Wednesday.

Obama will get little time to enjoy his election victory Tuesday, as he will have to get to work quickly with Congress to avoid the nation's "fiscal cliff" of looming mandated tax increases and spending cuts.

One likely remedy for revenue-raising will be to take the current dividend tax rate of 15 percent and hike it five to 10 percentage points, said Gross, co-CEO at the firm that runs the largest bond fund in the world and has $1.8 trillion assets under management.

"Obama ran on a higher-tax agenda," Gross said during a "Squawk Box" interview. "Marginal income taxes go from 35 to 40 (percent), capital gains from 15 to 20, dividends from 15 to who knows what...so they could go high, high and higher."

Risk-averse investors prefer dividend stocks, which are common in pensions and mutual funds even though they've largely underperformed other market indexes over the past four years.

Consequently, Gross said, higher dividend taxes would make those companies less attractive and thus take the stock market down 5 to 10 percent.

That's "the ultimate danger here for the stock market," he said. "Dividends are sheltered in 401(k)s, they're sheltered in pension funds. At the margins investors pay dividend tax rates. To the extent that you raise them from 15 to, say, 25 (percent), that implies in terms of equaling after tax rates another 5 to 10 percent down in terms of stock prices. We've been very spoiled for the last 10 years."

Last night, California passed Proposition 30, which approved an increase in the income taxes for 'wealthy' Californians (those with income >$250K). Education is by far the state's top expenditure, yet it ranks at or near the bottom of the nation on most school performance ratings. But rather than tackle the difficult work of determining how to spend their existing budget more effectively, it's far easier for Sacramento to address shortfalls by increasing taxes. Which is why Governor Jerry Brown crafted and championed Prop 30. Pity the Californian taxpayer, who already suffers the highest state income taxes in the U.S.

This is likely a preview of what's to come in future years. As we bump (or slam) into the hard limits of our predicaments, our political leaders will throw greater amounts of our current and future wealth at them. Like a drowning man frantically reaching out for anything that can possibly keep him from going under, our federal and state governments will grab for sources of revenue with equal desperation as they drown under their debts.

The markets are certainly concerned today. The Dow is down over 330 points as I write this.

We are entering the era of investing where the risks are increasingly disproportionate to the downside. The prudent investor should be much more concerned these days with return OF capital, versus return ON capital.

Though, more accurately, the priority should be return of purchasing power. It does no good to get your dollars back if they've been devalued in the interim.

The following steps have become 'no-brainers' at this point:

  • Find yourself a trustworthy financial adviser who will invest your paper capital with these risks in mind (we endorse several).
  • Own some gold and silver as insurance against a currency crisis.
  • Diversify into other hard assets if you're able to, particularly those with potential to produce primary wealth (timber, livestock, vegetables/grain, minerals, energy, etc.).
  • Assess your employment situation – how vulnerable is your income? Invest in ways to make yourself more valuable to your employer, add additional source(s) of income, and/or create your own business. 
  • Invest in increasing your personal resiliency (homestead investments, skill-building, physical & emotional health, and community)

Welcome to the future.

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125 Comments

RJE's picture
RJE
Status: Diamond Member (Offline)
Joined: Aug 31 2008
Posts: 1369
Adam, you nailed it my

Adam, you nailed it my Brother. You know, everything looks like a negative feedback loop to me. Are these your thoughts too? If so, are we going to be able to get ahead of this? It seems that the FED is always late to react, and is this time any different? Everywhere a Predicament so how do you get people to Demand anything when everyone sees the Predicaments?

OT: Your honey is really terrific. What really surprises me is just how long it lasts, its flavors just keep on giving. I have $100 bucks for a worthy cause, and would buy 4 more jars of same. Let me know, whenever.

Regards

BOB

westcoastjan's picture
westcoastjan
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Posts: 465
Good stuff Adam

Adam, I think you make a vaild case for defensive investing and focus on preservation of wealth, at least until the politicians can demonstrate serious resolve to deal with the predicaments. I do not have a lot of faith that this will happen any time soon as they have been all talk and no action when it comes to collaborating. The ideological gulf is wide. I expect they will dilly and dally around the looming fiscal cliff, and then at the last moment, after driving us all crazy with it, they will come to some sort of compromise, once again kicking the can down the road.

There is only one sure thing that you can count on - yourself, and your abilities to take care of yourself. That will be the deciding factor going foward on whether or not you are able to live life prosperously.

Coffee break over, back to work.

Jan

Time2help's picture
Time2help
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And the layoffs continue...

Boeing Company Layoffs

Adam Taggart's picture
Adam Taggart
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Goldman agrees

This just in from Jan Hatzius of Goldman Sachs (via BusinessInsider: "GOLDMAN: If You Make Over $250K, Your Taxes Are Going Up")

We are making slight changes to the fiscal policy assumptions embedded in our forecast. President Obama has indicated he would veto legislation that extends the 2001/2003 tax cuts for income over $250k, while congressional Republicans have objected to decoupling them from the middle-income tax cuts. In light of the President's reelection, we have opted to assume that the upper-income tax cuts will expire. These are worth $56bn in 2013, and their expiration is likely to increase the drag on growth from fiscal policy by around 0.2 percentage points in 2013, on a Q4/Q4 basis. While there is a clear possibility of a compromise at a higher income threshold like $1 million, this is roughly balanced by the possibility of fiscal restraint from other unexpected sources, or the possibility that Congress fails to address the fiscal cliff until early 2013.

RJE's picture
RJE
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Doug's picture
Doug
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Where to put our money

First, as a passing note, I note that neither the President nor Adam mentioned climate change in the "parade of horribles."  Will it take another devastating hurricane or other climate related disaster before climate may again be mentioned in polite society?  What was that third E again?

Moving on to money, the way I read it the USD is headed down, stock markets are now controlled by HFT and bonds are in a bubble that will pop as soon as interest rates rear their ugly heads.  So, where does my money go?

Adam's checklist:

Trustworthy financial advisor - check

Gold and silver - check

Employment situation - retired

Personal resiliency - check and continuing

That leaves only timber, livestock, vegetables/grain, minerals, energy, etc.  How do I acquire them?  futures markets?  That ain't going to happen.  Go into the farming, mining, timbering or oil business?  Seems unlikely.  I suppose I could loan money to local businesses or farmers, but the return of equity seems marginal if not downright risky in today's economic environment.  Any other suggestions?

Doug

cmartenson's picture
cmartenson
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Tax the rich!

I am quite unsettled by the idea of putting tax hikes that impact one segment of the population to a vote.  It brings to mind this quote:

"When the people find they can vote themselves money, that will herald the end of the republic."

          — Benjamin Franklin.

What's next, a ballot initiative to take the private assets of 49% of the population?  I know that's extreme, but the idea of asking the majority what it thinks of taking more money from a minority is somehow just not in the spirit of things for me.  Just too many ways for all of that to end badly.

I know it's been said, but the whole idea that the schools in CA have been 'rescued' by this tax hike (yes, that's the language being used) demonstrates a complete failure to address the core of the problem.  Perhaps the schools have become too expensive for some reason or there are better and more cost effective ways to run things or any of a number of other essential starting points for the conversation?

Here's a prediction:  the state will collect less than it thinks, some will be diverted (or 'borrowed') for other-than-school purposes, and nothing will be fixed except that the population of people earning over $250k in CA will shrink.  In just one or two years the schools will have chewed through whatever additional funds came their way and the whole problem will resurface.

Poet's picture
Poet
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Prop 30 And The Sorry State Of Education Held Hostage

Prop. 30 was designed to fool the California electorate, and it did.

No On Prop. 30: Gimmick, Not A Solution (October 9, 2012)
"The California School Board Association pointed out that the governor's initiative "...does not provide new funding for schools." Instead, under Prop. 30, politicians can take existing money for schools and use it for other programs and then replace that money with the new taxes. The official title and summary of Prop. 30 states "these additional revenues would be available to fund programs in the state budget." It is clear that Prop. 30 is just another budget gimmick."
http://www.sfgate.com/opinion/openforum/article/No-on-Prop-30-gimmick-not-a-solution-3934241.php

I wouldn't call it a gimmick. I'd call it holding a hostage to collect ransom.

But the real reason California's education system is in such trouble is because of several factors. Amongst them:

  1. Reductions in education funding from the state government.
  2. Academic bloat. As Charles Hugh Smith has pointed out, in about 20 years' time, the University of California at Davis grew its managerial/administrative staff from 3.2 per 100 students to 12.9 per 100 students. (You would think that technology and process improvements would reduce that need.)
  3. Unfunded pension and health care liabilities that need to be met - especially after poor stock market performance and money lost after investing in AAA-rated mortgage-backed securities that the banks knew were bad.
  4. The one thing no one dares mention: Free public education for the illegal immigrants ($8,700 per student per year - which is less than the average $10,000 in other states), and at the college level, in-state tuition and eligiblility for free financial aid (Cal Grants) based on income and need. Close to 10% of California workers are undocumented. Half of illegal immigrant households have children. You do the math.

Poet

Nate's picture
Nate
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tipping point

My gut tells me this is the tipping point. We are now at the point where the individuals on government assistance have the ability to vote themselves raises at the expense of the producers and those with assests.  In California we received an even bigger hit - the Democrats now own 2/3 (super majority) of the legislature and can raises taxes at will.  Prop 13 will probably get gutted before too long.

Recently Erik Townsend researched the best place to live on this planet.  His goal was simple - where to best ride out the coming storm.  Maybe Erik could do the same for the 50 states with the 3E's and freedom in mind and Chris could interview him. 

Nate

kennyq's picture
kennyq
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Obamacare

After last night election , on my way home, I felt scared. Obama's care is real.

I spoke to my insurance people two weeks ago about employees' insurance in 2014. There is no way we employers can meet the reqirement. I spoke to my suppliers,business is very slow everywhere. Obamacare 12 month from now,will kill many business in one shot.

So the first thought is "sell" the business while it still worth some money in next 6 months. The last 6 months near 2014 will be too late if more people realize what will happen,right?

I know many business will try to cut into 30 hour mark. The way of running a business will be change forever. At least, the office,shopping center's store hours being cut. So the rent $ per sq ft no longer valid. It will be too high. It will cribble the commercial real estate again. People running two 29.5 hour job or one 29.5 hour job will not spent money  as today with one full time job. The spending habbit will change although they may have same amount of income since lay off and cut hours everywhere. People will be scared. The worse of all, business will not expend and reinvest untill "dust settled". We are looking at a very probable  "Depression" in front of us now.

There will be more jobs fly out of America, or we call it "out sourcing" again.

So my "Time to Focus on 'Return of Capital' may be sell-sit-watch three step mode.LOL.

jonesb.mta's picture
jonesb.mta
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401k

Now that he doesn't have to run for reelection again, expect Obama to seize 401k's and "manage" them for us. More automatic money for the stock market, Goldman Sachs and fiends will take most of it I'm sure. Fiends was a typo but I felt fiends fit better than friends.

kennyq's picture
kennyq
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Posts: 80
unemployment

If some people asked to take a 29.5 hour job, is it better off to claim unemployment? Yes, it is most of the time. Mish, you maybe wrong. Unemployment rate may go up.

Arthur Robey's picture
Arthur Robey
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Prognosis

I believe that the power is again gridlocked with one side controling one house and the other side controling the other.

Fascism is when Capital becomes the Government.

The Fascists in the USA like gridlock. Expect no substansive Law reform to emerge from the Sturm und Drang. Max Keiser's Rape and Pillage of the financial wars will continue.

Divide and conquor works at the top as well.

Kikoman's picture
Kikoman
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Posts: 1
What a mess we got ourselves into

Hi! everyone,

In 2008 I was part of the nre revolution, today I just want to cry.  I do not think the world will end, but the future will be very hard and difficult for most.  Families will be dislocated and fragment away, many will die, starvation and epidemics will over take some and a few will survive.  I am 65 years old and preparing as best I can, but I have no illution about surviving the next downturn. After reading the CRASH COURSE, I see clearly for the first time what the future holds for us.  Thank you for the warning Chris  I hope other hear or read your words and do something about it.  I am going to go on and prepare as best I can.  Maybe I will last long enough to teach others to prepare and face the future with some hope.

Kikoman

charleshughsmith's picture
charleshughsmith
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tax and spend

Good summary, Adam. As my wife noted yesterday, "there is never an option on the ballot for improving efficiency."

Chris raises something I've discussed at length, the Tyranny of the Majority.  The top 1% pays 34% of federal income taxes, the top 10% pay 70% of the Federal income tax, the top 25% pay 87%. The bottom 50% pay 2% (not counting 7.65% Social Security payroll taxes, of course). With roughly half of all households already receiving direct government checks/assistance/transfer payments, we are probably already at the point where the 51% approve tax increases that fall mostly on a minority.  

While those who only work part-time simply don't make enough to pay more taxes, what's happening is the least productive sectors of the economy (those protected by the Central State) are increasingly being subsidized by whatever is still nominally productive in the private sector. The "ratchet effect" is in full force: government can expand but it is incapable of shrinking. Yet how can a government keep expanding while the economy stagnates?

What nobody dares discuss anywhere is the rising pressure a la Greece to move one's income to the underground cash-only economy to escape taxation. When is "paying your fair share" enough? What is a "fair share"?  

Add up all taxes and many of us are already paying 50% or more: 13% self-employment (soon to revert to 15.3%), 25% Federal on any income above $34,500, state income taxes, sales taxes, $12,000 in property taxes annually, and $13,000 in stripped-down healthcare insurance that would be paid out of taxes in "socialist" countries. In effect many of us (not rich but not poor) are paying "socialist" tax rates but without the mostly "free" higher education and healthcare you get in countries like France. 

As one member noted here, the option is to opt out before taxes/healthcare go even higher.

Jbarney's picture
Jbarney
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Perspective

Take a look at the history of the income tax.  Rates were much higher during the Great Depression and World War II.  Just saying.

I cringe at some of the anti-tax currents being voiced here, but have to remember that many of you are posting within the context of what is coming....and I am in fact in the same boat.  I don't want my tax dollars just thrown away. 

Jbarney's picture
Jbarney
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Taxation

Just think some taxation is worth it, however, maybe I need to devote more time to preps.  The more the goverment takes, the less I have to prep with.

Peace,

Jason

treemagnet's picture
treemagnet
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caught in the middle

are folks who don't receive state/federal welfare and on the other end, don't prosper/benefit from the money printing that circulates and pools around elites with contacts in cronyism, etc.  Folks who see their purchases buying less, far less, than it used to and suffering from the "benefits" experienced at the extremes are, in a very real way, paying more and receiving less.....sure sounds, feels, and hurts like increased taxation to me.  I feel like an eskimo floating on an ever shrinking patch of ice.

JF's picture
JF
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Population Management

To fear those who would debase or seize our money, while at the same time calling for better "population management", as Adam did, is a bit short-sighted.  Who is qualified to manage population and make the life and death decisions?  Surely it is not the state.  We've seen the barbarity of state-sponsored population management as practiced in China.  Let's stick with the inalienable right of life, endowed by our Creator, that the Declaration of Independence speaks about, and stay away from "population management."

Adam Taggart's picture
Adam Taggart
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Posts: 1776
I'll respond, but won't let this thread get hijacked

JF: As I responded earlier today to someone who had a similar reaction:

Your comment demonstrates why population management is such an important issue. It can't be raised without inflaming emotions, so rare is the leader who's willing to raise it. And by going unaddressed, the risk of problems created by overpopluation grow unchecked.
 
Your heated response is one of the most common and presumes that those who raise the topic are out to create a master class at the expense of the rest of the populace.
 
I ask you, are these not important questions to consider?
  • what should our national immigration policy be?
  • with a continued increasing population (439 million by 2050 estimates the US Census Bureau), when will the US begin hitting unacceptable limits given our finite resources?
  • presuming we want to avoid a chaotic collision with overpopulation (on both national and global levels), what steps should we be considering today? Which ones achieve the best odds for success, balanced with fairness and respect for human rights?
You may not agree, but I think these are responsible and prudent questions to be raising now. To be unwilling to do so is reckless, in my opinion.
 
FYI - I do not want this thread to get hijacked by reaction to this emotionally-charged topic and we'll moderate these comments heavily if need be. Chris and I will be tackling population as a topic on the site directly in a few weeks - that will be the right forum for a full-blown discussion on this subject.
robbie's picture
robbie
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Wow, if that's what

Wow, if that's what constitutes a heated response I may need to recalibrate my temperature meter. I think others may call this "prior restraint". Granted, this topic may be better dealt with in a future forum, but let's not shutter reasonable discussion. I get enough of this at lunch in MA.

CleanEnergyFan's picture
CleanEnergyFan
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Where are the "safe havens" for free market freedom-lovers

This election is a tipping point as mentioned earlier.  I think many producers will conclude that we have probably past the point of no return and will look for alternatives.  I would like to see a thread devoted specifically for discussing alternative locations to wait out the coming storm where harD working people are not vilified and Made to pay for the sins of those who would rather vote for a living.  I am personally thinking about Costa Rica....beautiful country with great people who are not looking for a handout, small government, lots of individual freedom, great weather, lots of fresh water and plenty of natural resources and mostly renewable power.  I live in Texas which is about as free as any state in the US but until we succeed we are still under the rule of the Federal Government.     I am ready to vote with my feet because I can't see any way to win at the ballot box and we have a government that clearly doesnt respect the limits of power defined in our Constitution    I look forward to connecting up with others who are looking for alternatives to our current direction.  

Grover's picture
Grover
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Marginal rates were higher, but so were loopholes

Jbarney wrote:

Take a look at the history of the income tax.  Rates were much higher during the Great Depression and World War II.  Just saying.

I cringe at some of the anti-tax currents being voiced here, but have to remember that many of you are posting within the context of what is coming....and I am in fact in the same boat.  I don't want my tax dollars just thrown away. 

Jbarney,

You are correct that marginal rates were much higher - up to 90%. Unfortunately, the folks who would have been subject to those usurious rates had a myriad of loopholes to crawl into. Can you imagine anyone but a fool paying the top rate? Make sure you count the oranges with the apples.

Reagan lowered the tax rates and closed many of the loopholes. That was a good step. If he hadn't vastly increased (tripled) the national debt in his 8 years, I'd say he was a very good president.

Grover

Arthur Robey's picture
Arthur Robey
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Gallows humour.

I get enough of this at lunch in MA.

Right on, R. I am pegged for a nutcase. I laugh along with them. Any laugh is a good laugh, even if we are laughing at different things.

RJE's picture
RJE
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Posts: 1369
Adam, we had this

Adam, we had this "emotionally charged" discussion before as a member here decided to chastise a member because he gave his opinion about how he would control population growth reduction. This after being prodded to share his opinion is how I interpreted it.

I happen to believe the problem is that we have two camps. Those who know we will have population moderation, and it's impolite to discuss because it makes you look around the room and wonder who will need to go. I'm in this camp, and think it best to avoid and move to more pressing issues as there are many.

Then we have the other camp who get to express how this population management issue could be dealt with in ways not fully imagined, and that would mean eliminating 5 Billion from this planet. That's a lot of Folks and means using some truly horrific weaponry.

So lets muse shall we. We moderate by gassing, nuclear, chemical, biological, and all means necessary and lets get started now. Lets be thoughtful and get on this problem right away. Lets have a lottery, like was done to pick who would be drafted towards the end of the Vietnam conflict, on Nation TV. A committee table will need to be constructed, we use nice comfortable chairs too as this subject requires those making the decision to be attentive. How many members do we think we will need? What are the rules, and will we let the people vote in the end? Perhaps we do it by race. We should start now as we will need to screen these good Folks that would run this program. Didn't we do this before? Genocide it was called, right? Lets call it what it is shall we because that is what it is.

Can we please be polite and just stick our heads in the sand and not deal with this just now? It is too Jim Jones of the famed Kool-aid incident like.

Can we please make this our last choice of discussion, and deal with the Fiscal Cliff, debt ceiling, and all other things first? 

If it is necessary to remove this posting then do please cancel my subscription. Nothing personal, it's just I am not dealing with this subject again. I don't mind being the first one eliminated for the cause. Thank you

Respectfully Given

BOB

RJE's picture
RJE
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Charles, I am a big fan and

Charles, I am a big fan and this is known. I thought of you as I read Adams post.

I was asked by a friend who simply thinks Obama as "The Prince of Darkness" (I do not), and asked me why Obama was elected. My answer to him I thought was simple. When you have bloated government and want to keep your job as you work for the government or related jobs dependent on government then you vote for the known quantity. When you are benefiting from our entitlement state in the form of welfare, SSI checks and all other pacifying payments you have those receiving these payments as protecting their self interest so vote for a known quantity. This represents 51% of the population with many more Baby Boomers that will soon enter entitlement phase, voting too for a known quantity. So the percentage is actually higher as we Baby Boomers want our entitlements there when we show up to collect. That is why I believe Obama was elected. 

I should add too, that 61% of those receiving payments are white, and 33% colored as it is most often thought a racial divide mostly benefiting the Blacks but that is not really correct.

Now you have your blue states locked in as the President (current) is a known quantity. I don't think it goes beyond this.

The next President, and there after just has to assure these folks are taken care of, and the percentage will just grow from here as the Baby Boomers move into entitlement age, and protects their self interests.

How can we balance our Fiscal Issues when pandering to the vote of this most impressive voting block? I just don't think Congress has the brass to tackle this issue without taking great risks of offending an ever growing entitlement class. This has to end badly as Congress, while saying the right things so colorfully, and with a back door opened for quick escape are just locked into the same ole same ole.

I remain hopeful for change but I'll believe it when I see it. We either have cash pumping out by the Trillions until the cash overwhelms the system or retrenchment removes the cash in the system by debt repayment or default. We'll see. I know this though, when push comes to shove that the morality issue is not an issue any longer, and default/bankruptcy will be a valid escape from debt, and running up the last few bucks on the credit card will happen just before this bankruptcy is declared. Human nature when all the leaders are taking similar advantage of this most easy, and legal recourse.

So happy you take the time to comment here often. Good stuff really.

Respectfully Given

BOB

RJE's picture
RJE
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Things that make you/me go Hmmmm...

Bank Of England Halts QE After "Potency Questioned"
Submitted by Tyler Durden on 11/08/2012 07:38 -0500

Bank of EnglandBarclaysBloomberg NewsBOECitigroupEuropean Central BankGross Domestic ProductJapanLloydsMervyn KingMonetary PolicyQuantitative EasingrecoveryUnited Kingdom

In what may be the most disturbing news of the day, moments ago the BOE announced it is halting its own version of QE3, and capping the asset purchase program at £375 billion after "some policy makers questioned its effectiveness in supporting a recovery that remains lackluster." Could it be that even that peculiar Homo Sapiens subspecies known as "economist" is starting to realize that when applying the same "remedy" time after time to absolutely no avail, and where even the market no longer responds to unlimited injections of liquidity, then perhaps it is time to end said "remedy" altogether? And how long until the voodoo shamans in the dark lit room at Marriner Eccles follow through? Sadly, if Japan, and its 9 (so far) rounds of easing, is any indication, we have a lot more pain to go before what has been glaringly obvious to every hotdog vendor and shoeshine boy is also understood by Economics Nobel prize winners.

From Bloomberg:

The nine-member Monetary Policy Committee led by Governor Mervyn King kept its target for asset purchases at 375 billion pounds ($598 billion) today, ending its third round of quantitative easing. The decision was forecast by 35 of 45 economists in a Bloomberg News survey. The remainder had forecast an increase of as much as 50 billion pounds.

Today’s move suggests the London-based central bank may focus on credit-boosting initiatives such as the Funding for Lending Scheme to ignite growth. Increased inflationary pressures may also have prompted policy makers to hold fire even as surveys point to renewed weakness after the U.K. economy surged 1 percent in the third quarter.

BOE Deputy Governors Paul Tucker and Charles Bean both suggested in recent speeches that asset purchases may no longer have the same impact on the economy as when first introduced in 2009. At the same time, Martin Weale has questioned whether loosening policy is right with inflation above the central bank’s 2 percent target.

The UK needs more hedonically edible iPads because inflation appears to be an issue:

Inflation was at 2.2 percent in September and King said last month that recent energy costs increases mean it will stay above the goal “well into next year.” Renewed signs of price pressures combined with the third-quarter gross domestic product data and comments from MPC members led banks including Citigroup Inc. and Barclays Plc to abandon forecasts of more QE today.

“The widespread expectation of unchanged policy marks a sharp turnaround from forecasts just a few weeks ago that QE would be expanded,” said Chris Crowe and Blerina Uruci, economists at Barclays in London. “This is partly due to evidence of firmer inflationary pressures.”

The MPC had new growth and inflation forecasts at today’s meeting, which it will publish next week. Minutes of the meeting, showing how the committee members voted, will be released on Nov. 21.

Finally, since one never says never in Keynesville, it is likely only a matter of time before the insanity returns:

Even with QE halted, the Bank of England still has the FLS, which it set up with the U.K. Treasury and is aimed at boosting lending. The program began in August and as of last month, 30 financial institutions had signed up, including Lloyds Banking Group Plc and Barclays.

“QE still has a benefit and those benefits will stay there -- they’re not unwinding any purchases,” said Alan Clarke, an economist at Scotia Capital in London. “And they won’t close the door on it, they’ll leave their options open.”

And now, we look forward to the ECB confirming that when it comes to failed monetary system, for every good cop there is at least one absolutely insane cop.

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Irony

Am I the only one who sees great irony in Chris and Adam being willing to 'go to the mats' to discuss population control?  The only reason population may be a problem in the US is that we consume way more resources per capita than any nation on earth.  China and India have about a third of the world's population and will likely grow by the billions by 2050.  We have very limited leverage to dictate the population policies of these nations and the rest of the third world where the problem is greatest.

OTOH, Chris and Adam are resolutely unwilling to discuss a far more pressing problem, climate change.  We can have a decisive impact in that arena if the political will is there to do something.  I would suggest that climate change is far less controversial than population control, and is subject to scientific evidence, unlike population control which has all kinds of religious, ethnic and political overtones.

Just my $.02.

Doug

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Doug - Please understand that

Doug - Please understand that this is not a poke in the eye.

Why do you feel you need Chris or Adam to weigh in on Climate Change?  There is a fantastic,data rich, on-going discussion in another thread here on PP.com.  Do you feel that what Adam and/or Chris think about climate change would validate what is already there? 

I don't.  The information already stands on it's own two feet.  Jacques Yves Cousteau could show up and throw down and I don't think it would make much difference to the data that speaks volumes without saying anything.

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I so agree DOG-in-a-pile as

I so agree DOG-in-a-pile as there are many well qualified and intelligent speakers on the subject here at PP that frankly align better with me and how I see things, and they are in the field experts so who am I to question their numbers. Where Adam and Chris are not in their class (meant no disrespect).

Frankly Dog, your views nuclear are clearer thinking than many thoughts Chris has spoken of in the past (again no disrespect to the Professor) and so I weight towards your opinion when you two have your discussions.

Mark Cochrane being the other expert here at PP I found fascinating and extremely giving and bright.

Have a Great Day Folks

BOB

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Thanks but.......

Whatever dark and nefarious forces running amok unchecked on this site that modified my post and added the link to the The Definitive Global Climate Change (aka Global Warming) Thread, hear this......

Thanks. 

Now, please tell me how you freakin' did it because every time I try to do that text highlight linky thingie I end up going to an 80s Grateful Dead show and that is quite possibly the worst thing that could happen to anyone.

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It was me, Dogs

You're welcome. Figured the post had more punch if folks knew which thread you were referencing.

Adding a hyperlink is pretty straightforward:

  1. find the URL you want to link to
  2. copy it
  3. find the menu bar at the top of the Comment box you've written in and find the 'Link' icon (it looks like a globe with a chain link beneath it - I'll post an image below)
  4. highlight the text you want to hyperlink
  5. click the Link icon
  6. a pop-up widow will appear. Paste the url into the provided field.
  7. click OK

Here's the icon to look for in the menu bar in Step 3 (highlighted by the red box):

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Sounds like question 7 here

Sounds like question 7 here in Maryland, where they use casino revenues for education.  But that only DISPLACES current funds for education one for one that can then be used for whatever porkbarrel program O'Malley can dream up.  I voted for it only because the word cut isn't in our socialist governor's vocabulary, and figure voluntary revenues via gambling is better than yet another tax hike to me.  I'm already getting jacked up with about 5 new tax increases between last year and next year. 

Also, a measure passed in Maryland that gives illegals, I mean "undocumented immigrants"  in-state tuition rates...

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Thanks Adam

Like this?

Enjoy.......

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Adam, that was way cool of

Adam, that was way cool of you. I used it to get Marks name as it aluded me.

Hey!, can you change the scores of the World Series? Now, that would be cool. Or hook me up and Ill do it!

Still... GRIEVING... here.

BOB

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Red States Also Most Dependent

Aaron E. Carroll, MD, MS at Indiana University tells us that in 2010, residents of the 10 states Gallup ranks as “most conservative” received 21.2 percent of their income in government transfers, while the number for the 10 most liberal states was only 17.1 percent.

Source Article: http://www.slate.com/blogs/moneybox/2012/02/14/how_blue_america_subsidizes_red_america.html

And here's a NATIONAL HEAT MAP OF DEPENDENCY on government benefits...

The Geography of Government Benefits (February 11, 2012)
"The share of Americans’ income that comes from government benefit programs, like Medicare, Medicaid and Social Security, more than doubled over the last four decades, rising from 8 percent in 1969 to 18 percent in 2009."
http://www.nytimes.com/interactive/2012/02/12/us/entitlement-map.html?ref=us

Check out the interactive chart that breaks it down to the county level.

Note that veterans' benefits only account for 0.4% of personal income. And look at which states need the most income support.

And, here's a MEASURE OF TAX DOLLARS COLLECTED VERSUS RECEIVED...

Most Red States Take More Money From Washington Than They Put In (February 16, 2012)
"The states that contributed more in taxes than they got back in spending were more likely to have voted for Obama in 2008 and were more likely to be largely urban. (There are some clear exceptions: For instance, New Mexico, a rural, Democratic state, gets more federal money per tax dollar than any other state.)"
http://www.motherjones.com/politics/2011/11/states-federal-taxes-spending-charts-maps

So to those of you for whom this is new... Please, adjust the anecdotes that you are telling accordingly.

Poet

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Die off

Bah humbug!  We're going to reduce our world population severely, but not in any thoughtful, organized, compassionate way.  We're going to run wilfully into any one of several walls directly ahead of us (war, pestilence, environment, energy) and millions or billions are going to die prematurely.  It might be more than "necessary" or it might be less than "enough," but it's coming.  The one percent who see it coming won't be able to alter the course sufficiently or measureably, despite the best of intentions and good ideas.  Let's be kind to one another as we hurtle toward extinction (or mere Armageddon).

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Bah

thc0655 wrote:

Bah humbug!  We're going to reduce our world population severely, but not in any thoughtful, organized, compassionate way.  We're going to run wilfully into any one of several walls directly ahead of us (war, pestilence, environment, energy) and millions or billions are going to die prematurely.  It might be more than "necessary" or it might be less than "enough," but it's coming.  The one percent who see it coming won't be able to alter the course sufficiently or measureably, despite the best of intentions and good ideas.  Let's be kind to one another as we hurtle toward extinction (or mere Armageddon).

I'd be curious to hear Arthur's take on this one...

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Nice to hear someone else

Nice to hear someone else considering Costa Rica.  It really is a reasonable alternative for US Citizen.   I understand there is already a large expat population from the US and other places there.  Perhaps the topic of 'Safe Havens' would make a good Group within the Prepare section of the website. 

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thc0655 wrote: Bah humbug!

thc0655 wrote:

Bah humbug!  We're going to reduce our world population severely, but not in any thoughtful, organized, compassionate way.  We're going to run wilfully into any one of several walls directly ahead of us (war, pestilence, environment, energy) and millions or billions are going to die prematurely.  It might be more than "necessary" or it might be less than "enough," but it's coming.  The one percent who see it coming won't be able to alter the course sufficiently or measureably, despite the best of intentions and good ideas.  Let's be kind to one another as we hurtle toward extinction (or mere Armageddon).

Agreed.  Population control will happen, but we (US) won't have much to do with it because it won't happen here.  We can't stop it or significantly alter its course.

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Doug wrote: thc0655

Doug wrote:

thc0655 wrote:

Bah humbug!  We're going to reduce our world population severely, but not in any thoughtful, organized, compassionate way.  We're going to run wilfully into any one of several walls directly ahead of us (war, pestilence, environment, energy) and millions or billions are going to die prematurely.  It might be more than "necessary" or it might be less than "enough," but it's coming.  The one percent who see it coming won't be able to alter the course sufficiently or measureably, despite the best of intentions and good ideas.  Let's be kind to one another as we hurtle toward extinction (or mere Armageddon).

Agreed.  Population control will happen, but we (US) won't have much to do with it because it won't happen here.  We can't stop it or significantly alter its course.

Sure about that?  Be mindful of the "normalcy bias".  Just sayin'.

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We Need To Consider What A Radically Different Climate Means

On this site we come together to learn about, and then consider how our monetary systems are flawed and greatly missmanaged. We discuss what the implications of these realities likely are and how they might it effect our lives and our world. And with this new knowledge and deeper understanding we can discuss ways of finding solutions. Or we discuss the various 3 E issues so we might find ways to prepare and protect ourselves from financial loss and many other kinds of hardship.

I know that great change unlike anything humanity has faced is now upon us. And I am currently doing my best with what time and resources I have availible to learn and to discover the truth in regards to what has caused these many converging world crises.  I also seek to understand why we are failing to successfully respond to them.  

It has been argued here at PP that climate change is an insignificant problem, or that this is an insurmountable and therefore an unsolvable problem so why bother discussing it, or that by reducing our personal material and energy consumption as a response to the 3 E crises we can effectively responsed to the climate change crises. My belief is that the same underlying causes of our financial and resource and other crises are also the cause of the climate change crises as well.  

My opinion is that becuase we now know that climate change is real and very serious that all the issues and effects of climate change must to be considered in an inclusive and wholistic manner along with the other pertenent 3E issues here. The reason for this is because of the broad implications of the catastrophic environmental, social and economic damage and hardship that will result from climate change. My belief is that climate change must to be a primary concern here if members are genuinely concerned about the state of our world. 

Individual efforts to reduce consumption and energy use are part of a possible approach to addressing this crises, but these efforts will make no difference unless we also achieve dramatic cuts to worldwide greenhouse gas emmissions. But the current reality (and likely future reality) is that we are increasing C02 emmissions and we will likely have caused additional very harmful methane gas to be released as a result of arctic sea ice melt and thawing permafrost.

So the point is that we are not going to escape or avoid this issue irregardless as to whether we believe that we can prevent climate change from continually getting worse or not. Or if we make the personal effort and lifestyle change to reduce our energy use. 

The climate change thread mostly helps to us to better understand the science of climate change and the discussion there does address related climate change issues as well. But if the intention of PP is to play a meaningful part in the possibility of somehow playing a meaningful part in trying to create a World Worth Inheriting we must openly acknowlege, factor in and deal with the truth of what the present and coming climate change crises could mean in terms of it's underlying causes and it's broad environmental, social, political, economic other impacts.

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Geez, I don't like this

Geez, I don't like this conversation but I have thought that the heavy population centers around the world are most certainly near their food source and water, we can reasonably be assured of this. Now that means the mass GENOCIDE of large groups must be done close to these resources. So, this makes sense and why? The weapons needed to manage population will be environmentally unfriendly so what is the point of even carrying on about all of this. What we seek in effect will be destroyed for many years to come. Done with this topic now.

Adam!....Arrrrrgggghhhh!!!, but I love you Brother.

Can't shoot the messenger and it is something we will deal with.

In many war time situations, due to logistics, 4 Star dudes have to make these type decision all the time. I think of the Philippines during WW ll as a classic example of tragic consequences. The Death March is a difficult remembrance. Of sheer will and determination many Men  seen the light at the end of the tunnel.

It's like we are running to the end of the story without trying our damdest to solve the issues and make a better life and a future right now.

Respectfully

BOB

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Red/Blue might not be the only correlation that could be made

Poet wrote:

So to those of you for whom this is new... Please, adjust the anecdotes that you are telling accordingly.

I'm not sure you can call Red States conservative or Blue States liberal.  Republicans are not conservative and the Democrats are not liberal.  They both just like to spend and tell others how to live their lives.  It used to be Republicans concentrated on small government, limited spending and Liberals used to concentrate on civil liberties.   Neither major party stands on principals any longer...

NM does receive a huge amount of the tax dollars per capita because it is a large state with a small population (2 million - population density 17.6/mile), relatively poor (not a lot of tax dollars paid) with a large number of Indian reservations, large area (3 Interstates), large military installations (3 air force bases and a missile/spacecraft testing range) and two national labs (Sandia and Los Alamos).

So I've been trying to figure out why people are Democrats and Republicans since neither party seems to represented the ideals people attribute to them.  Why do people vote for those that don't represent them.  It seems like it's come down to the same rabid behavior of sports team fans.  It doens't matter if the team is good or bad, you associate with them and the other side is the enemy.  Or at least that seems to be the message of current politics.  Perhaps it's why this last election seems to be everyone voting for the least offensive (lesser of two evils).

Here is an interesting visualization of the election results I came across:

Maps of the 2012 US Presidential Election Results

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Three strikes and we are out....?

As I see it, we have three interrelated problems.

1. Global fiscal crisis - Immediate crisis that is going to cut us all long wide and deep in a short period of time. Whether we tumble into a deflationary deppression or a Wiemar style hyper inflation, economic pain will be the order of the day. Just plain miserable but ultimately survivable as we perhaps re-establish a hard currency based system. Major issue but recoverable to some level of normalcy within a decade or so.

2. Energy/resource scarcity - With the advent of peak oil we've already arrived but the ramifications will play out over several decades. The screws will be tightened every year as the costs of most everything rises as energy gets more expensive and materials get more scarce. Financial collapse may stretch the problems out longer and in the worst cases we can mine our decaying infrastructure for a time. Efficiency, reuse and recycling can all slow the problem but not fix it. Ultimately we have to either accept much lower populations or we have to accept much lower material standards of living (probably both in the end). The pie is only so big. Note, population reduction doesn't have to be through a draconian policy or some nefarios scheme. In all likelihood, the finanical crisis will start us on the road down all by itself. Look to Greece, less health care and other support leads to higher death rates. Once death rates exceed birth rates then the population will trend down.

3. Climate change - this is a wildcard and will play out over centuries to millennia. The die has been cast and we can no longer avert this. This is the death of a thousand cuts, more flooding, droughts, heat waves, mistimed frosts, hail etc. We have little appreciation of just how much we rely on climate staying roughly within a certain range (it's always just been there for us for 10,000 years, so we take it for granted). We will learn though. Put in crassly humanistic terms this will make everything more expensive. We can't fix it or cure it but if we work real hard at proactively dealing with items 1 & 2 above we can mitigate it. Think of it as taking tylenol to keep the fever from getting life threatening for our children and grandchildren. People needn't get so bent out of shape about this, we have to deal with our resource and population issues anyway. This just lends a note of urgency.

We don't get to pick and choose what we want to accept, we have to deal with all of this and it won't come for free. If we can get a government that actually functions then it will require substantial cuts in entitlements, increases in management efficiency AND tax increases that are sufficient to cover the debt payments. Tax and spend is unsustainable without a rapidly growing economy, cut tax and spend is just plain suicidal, cut spending and tax will be unpalatable to all but seems to be the corner we've painted ourselves into.

Mark

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Agreed Mark. Lets get to

Agreed Mark. Lets get to work.

BOB

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Time2Help wrote: I'd be

Time2Help wrote:

I'd be curious to hear Arthur's take on this one...

"We have to get of the planet."

The Mayans are coming in December to take us all to Arcturus on their spaceships. 

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No, Dogs, I have it on authority...

The Mayans are coming in December to take us all to Arcturus on their spaceships

No, Dogs, I have it on authority...we'll be fine. *cue guitar and fiddle music*

“Hi, Tom Bodett trying to make sense of this Mayan calendar. It seems to end Dec. 21st, 2012. That’s, unsettling. Oh well. Still plenty of time this year to stay at Motel Six and get a clean comfortable room for the lowest price of any national chain.  And we’re still taking reservations for after Dec. 21.  All due respect to the Mayans.  Sorry, King K’inich Ahkal Mo’ Nahb. Nothing but love for ya.  I’m Tom Bodett for Motel 6 and we’ll leave the light on for ya.”

See? You and Arthur have nothing to worry about.

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as to the subject

I agree that we should be more concerned about the return OF our money than the return ON our money.

Dogs and Dr. Chris are both gonna get a great return on their solar panels. If I had the money, I'd put up as many as would fit on my roof. Oh well, we've at least started with our first batch.

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Dogs

Dogs_In_A_Pile wrote:

Time2Help wrote:

I'd be curious to hear Arthur's take on this one...

"We have to get of the planet."

The Mayans are coming in December to take us all to Arcturus on their spaceships. 

ROTF!

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